Sharpest drop since pandemic
UK construction activity slumped in July at the fastest rate since the early days of the COVID-19 pandemic, raising new concerns for the housing market and economic growth.
Figures released by S&P Global revealed the UK Construction Purchasing Managers’ Index (PMI) fell to 44.3 in July, down sharply from 48.8 in June. It marks the steepest monthly decline since May 2020. A score below 50 indicates a contraction.
Economists had forecast the index to remain flat, but the latest data suggests the sector is under significantly more strain than anticipated.
Housebuilding leads the decline
The downturn was broad-based across civil engineering, commercial construction, and particularly housebuilding – a key government priority. Analysts highlighted residential construction as the sector’s biggest drag, citing delays on sites, declining new orders, and fragile customer confidence.
Joe Hayes, principal economist at S&P Global Market Intelligence, said construction firms were bracing for “challenging times”.
“They’re buying less materials and reducing the number of workers on the payroll,” he said. “Expectations also continue to underwhelm, despite a modest pick-up in confidence from June’s two-and-a-half-year low.”
Government housing pledge under threat
The figures deal a blow to government ambitions to increase housebuilding amid a worsening housing crisis. With interest rates still elevated and mortgage approvals remaining sluggish, developers are increasingly wary of committing to new projects.
Industry leaders warn the July figures reflect deeper uncertainty across the economy, where both inflationary pressures and shifting demand continue to cloud investment decisions.
Broader economic concerns remain
Also published by S&P on Wednesday was composite PMI data – including manufacturing and services – which edged down to 50.8 in July from 51.7 the previous month. Though still in growth territory, the slight decline indicates the broader UK economy is barely expanding.
The construction sector accounts for roughly 6% of UK GDP and employs over two million workers. Prolonged weakness in this sector could weigh heavily on economic performance in the second half of 2025.
Calls for government action
Calls are growing for the government to intervene more decisively, including accelerating public infrastructure projects and offering incentives to kickstart private housing developments.
For now, confidence across the industry remains subdued – with builders scaling back hiring and procurement, and bracing for an uncertain autumn.
